Fulcrum Commodity - Downgraded

The fund is a quantitatively driven, market neutral fund that invests in commodity indices and options, through the utilisation of systematic techniques. Fund manager, Mohammed Fawaz, focuses on risk management, aiming for a volatility profile of 12-16%.

Given our negative view on commodity markets, a fund which focuses on alpha to the exclusion of beta has an intuitive appeal. However, the fund has generated negative returns in 2012, 2013 and so far in 2014. Three of the funds strategies; fundamentals, short term trading and hedging, have consistently generated alpha. On the other hand, the fourth strategy, trend following (40% of risk budget), has consistently destroyed values since mid-2010. The manager sees a resumption of more ‘normal’ markets post QE as trend following’s salvation. The timing of normality is hard to predict, especially now that Japan (and Europe) are stepping into the breach recently vacated by the Federal Reserve.

The fund is not preserving or enhancing clients’ wealth and as such is not achieving its stated objective. Therefore, the fund has been downgraded from four stars to a one star SELL rating. This fund is removed from our Premier Selection list of funds.

The property market is illiquid and this can, in exceptional circumstances, lead to times in which clients are unable to dispose of part or all of their holding. Property valuations are made by independent agents but are ultimately subjective and a matter of judgement.

Fund manager

Mohammed Fawaz

Date

19/11/2014

Fund rating

The value of your investment can go down as well as up, and you can get back less than you originally invested.

Past performance or any yields quoted should not be considered reliable indicators of future returns. Restricted advice can be provided as part of other services offered by Bestinvest, upon request and on a fee basis. Before investing in funds please check the specific risk factors on the key features document or refer to our risk warning notice as some funds can be high risk or complex; they may also have risks relating to the geographical area, industry sector and/or underlying assets in which they invest. Prevailing tax rates and relief are dependent on your individual circumstances and are subject to change.